Nations of the world… divide!

Smaller countries do a better job of running themselves, says Bill Bonner.

Up. Down. Up. Down. The Dow posted a gain yesterday almost exactly equal to the amount it lost the day before. In other words, it went nowhere. Gold slipped a little, not much.

Are you out of the stock market, dear reader? We hope so. We see nothing but misery coming from stocks in the years ahead. Yesterday, for example, we saw one analysis that put the likely return on the S&P over the next ten years at almost minus 10% per year!So, let's turn our attention to something else

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Scotland seems ready to break with Britain and go its own way. It is by no means the first breakaway country in history. But most of the last five centuries have been spent putting nation states together, with relatively few successful defections.

It took many generations for the Frankish kings to bring modern France into being: conglomerating the Picards and the Poitevins, the Limousins and the Corsicans, those who spoke the 'langue d'oc' with those whose mother tongue was 'langue d'ol'. Only under Napoleon, with national newspapers, national roads, and public schools was the job finally accomplished.

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Meanwhile, Germany wasn't unified until 1871. Before that, it was a hodgepodge of kingdoms, duchies and principalities.

America, too, was assembled from smaller pieces. The native tribes had to be exterminated or relocated. Some parts were purchased honestly. But the Mexicans had to be defeated twice to make them more agreeable. Texas came voluntarily into the United States, then regretted it. Finally, the rebellion of the southern states was crushed and the union held together.

Great Britain was assembled over a much longer time. Scotland was incorporated by the Acts of Union in 1707. But this followed a series of bloody battles and preceded even more. Wales was brought to heel in 1282. Ireland was effectively conquered when Hugh O'Neill surrendered in 1603.

And now, if the Scots go their own way, it is a new trend and probably a better one.

The true measure of an economy's strength is how much nonsense it can support. The Soviet Union put up with 70 years of Bolshevism and was wrecked by it. Argentina has already survived about the same amount of time with Peronism and still suffers from it.

And the US carries its own burdens typically expressed in underhanded euphonisms such as 'the war against terror', or the Patriot Act, or the Independence Card, or in capital letters, such as the TSA, SSA, BLS, SEC, IRS and so forth.

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But the evidence suggests that a small, rich country has a big advantage. It tends to put up with less nonsense than a big one.

Where do taxpayers get the best deal from their government? Our guess is Switzerland. The trains run on time. The airports are clean, modern and efficient. Towns are idyllic. The public health system works. Government workers including those who check your passport at the border are polite and business-like.

Switzerland is not only small. It is not a nation state. It is a confederation of independent states like the US before it was consolidated.

Small states do a better job of controlling their government, their military forces and their debt. Not because they are smarter or more peaceful. But simply because there is less distance between the governed and their governors. Citizens can see what their leaders are up to. If they don't approve, the politicians can be beaten in the next election, or in the street.Independence for Scotland? Yes, it's probably a good idea.

And so is independence for Maryland.


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